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“his measures have failed to match the scale of the challenge we face.”
The Institute of Chartered Accountants said that the Budget
“does nothing to address the failing competitiveness of the UK nor to restore confidence overseas in the UK as a place to invest and do business.”
Those are damning assessments—and unfortunately for the British public, they are right.
Make no mistake: the two major planks of the Government’s Budget—hiking up taxes on motorists and raising alcohol duties—are nothing more than stealth taxes. This year’s Budget is what I would call eco-spin of the most cynical kind. Environmental taxes generated £35 billion for the Government in 2006. That might sound like a lot of money, but despite all that tax, the Office for National Statistics tells us that environmental tax receipts as a percentage of gross domestic product have actually fallen from 3.6 per cent. in 1999 to just 2.7 per cent. in 2006. Moreover, environmental taxes as a percentage of total taxes and social contributions have decreased from 9.7 per cent. in 1999 to just 7.3 per cent. in 2006. We are going in the wrong direction. That is because green tax rises have been dwarfed by the Government’s wider stealth-tax agenda over the past 10 years.
Steve Webb: I very much share the hon. Lady’s analysis that green taxes should form a substantially higher share of total taxes. She suggests a big increase in that share. Can she identify some of the green taxes that she would like to increase so that other taxes could be cut?
Justine Greening:
We have talked about a whole range of green taxes that we would like to see. We set out the increase in the banding on vehicle excise duty and we talked about the feed-in tariff; we raised the issue of the carbon levy and changing from the climate change levy. We have set out a whole range of policies. Moreover, we have talked about how we would handle them. Unlike the Government, we see green taxes not as stealth taxes but as replacement taxes. When we increase green taxes in one area, we will reduce other
taxes in another. The fact that the Government have not handled the issue in that way is one of the main reasons why people have so little trust in Labour’s green tax agenda.
Putting aside for a moment the issue of green tax revenues, we have to ask whether the agenda has had a positive impact. Many of the figures suggest that it has not. Since 1997, UK carbon dioxide emissions have risen. If we are to meet the UK’s 2010 target, we will have to reduce CO2 emissions by about 87 million tonnes. Such figures show the utter failure of the Government’s green agenda.
Many speakers tonight have talked about the Government’s lack of vision, and I totally agree. [I nterruption. ] Government Ministers sat on the Front Bench are shaking their heads—saying, I presume, that the taxes that I have mentioned are not stealth taxes. I hope that when she gets to her feet, the Exchequer Secretary can talk about the changes in behaviour that she is expecting as a result of the vehicle excise duty tax changes, for example. Is she prepared to publish the Treasury’s assessment of how many cars there will be in each of the vehicle excise duty bands over the next three years—the assessment that led to the Government’s calculation in the Red Book on the vehicle excise duty tax take?
Will the Exchequer Secretary publish the Treasury’s assessment of the number of new cars that will sell in the bands that have the first-year charge? For example, how many does she expect to be in the top band, M? If the Government will not publish those figures, we will be left with the conclusion that the figures are not there and that the calculations were about increasing tax more than anything else. I give the Exchequer Secretary’s officials, who have been sitting there diligently, the chance to prepare those details; I hope that I shall be pleasantly surprised in a few minutes.
I come to the contributions made in this debate, which was wide-ranging. I particularly enjoyed the speech made by the hon. Member for Nottingham, South (Alan Simpson), who had lots of interesting ideas and showed some sort of vision of how he would like the green tax agenda to be carried forward. He raised not only the issue of climate change, but the peak oil challenge, the current stock market and the credit crunch. He underlined the need for successful action in the coming years.
The hon. Member for Northavon (Steve Webb) talked about the lack of joined-up government, about which a number of us have been extremely worried. However committed the Ministers at the Department for Environment, Food and Rural Affairs are, what they are trying to achieve is being fundamentally undermined by their colleagues in other Departments—especially the Treasury and the Department for Transport, which seems to be producing many plans that will have a serious CO2 emissions impact. It is failing to set out the ultimate climate change impact of its plans when it presents them to the public.
I move on to the contribution made by the hon. Member for Leyton and Wanstead (Harry Cohen); I have happy memories of serving with him on the Work and Pensions Committee. His was a robust and—I will not dress it up—characteristically anti-capitalist speech.
He wants us to clamp down on capitalism, non-doms and all sorts of things. I do not agree. His arguments are slightly yesteryear for me, although I appreciate that they are still important to him.
We then moved on to an absolutely fantastic contribution by my right hon. Friend the Member for Wokingham (Mr. Redwood), who pulled together the strands of the various challenges that we face, not only with the climate change agenda but particularly acutely with the problems in the world stock markets. I thoroughly agreed with him when he described the Chancellor as complacent. The issues that we face in the world financial markets are certainly not ones to be complacent about. He contrasted very well the US Government’s speed and effectiveness in handling the issues of Bear Stearns in recent days with our own Government’s handling of the terrible problems at Northern Rock, which still continue to play out.
The right hon. Member for Leicester, East (Keith Vaz) spoke about alcohol taxation. I look forward to his Select Committee’s report on binge drinking. What is needed is an informed debate, and when that takes place we will see that imposing swingeing tax rises across the whole alcohol budget is probably not the right way to go about tackling binge drinking and that we should have targeted measures instead.
My hon. Friend the Member for North-West Norfolk (Mr. Bellingham) gave us a completely different slant on today’s debate when he talked passionately about the issues faced in the rural area that he represents. He covered the problems of small businesses, for whom there certainly was not much in the Budget. He discussed the closure of post offices, which are themselves small businesses, and the plight that they are facing. He spoke about pubs—another form of small business that was just mentioned by my hon. Friend the Member for Ribble Valley (Mr. Evans). He clearly set out the challenges that many of our pensioners face—not only in meeting rising fuel bills but, given their inability to switch to lower-emitting vehicles overnight, as a result of the Government’s measures on vehicle excise duty.
The hon. Member for Luton, North (Kelvin Hopkins) made an interesting speech about the issues that he picked up on some time ago when he worked with the union, NALGO. He said that he would have liked to see a relaxing of fiscal policy at this point in the economic cycle. It is concerning that we are not in a position to do that because of the way in which the Government squandered so much of the economic growth that we have had over the past 15 years. I hope that that does not mean that we are constrained in how we handle the difficult times that may be ahead.
The right hon. Member for Ross, Skye and Lochaber (Mr. Kennedy), who is not in his seat—I am not sure where he will be at this point in the evening—mentioned a lovely-sounding place called Applecross and the problems with petrol prices and the 2p increase in fuel duty. He also talked about post office closures.
My hon. and learned Friend the Member for Torridge and West Devon (Mr. Cox) made a powerful contribution in which he spoke about the lack of vision to which many Members are still referring and the fact that there is no overall coherent logic to what the Government propose in their Budget. He recognised
the need to pull together climate change and a whole range of other areas—not only green taxation but renewable energy and even food security.
The hon. Member for Cheltenham (Martin Horwood) initially talked about matters that had nothing to do with climate change, including bingo and double taxation, but went on to discuss his concerns about the low-carbon energy strategy and the shadow price of carbon. There are some serious debates to be had about the shadow price of carbon, which is a vital piece of any calculation for understanding the impact of carbon emissions on the environment and, specifically, alternative policy options. If that carbon price is not set correctly, not just today but as it changes over the longer term, we will get bad decision making by Government.
My hon. Friend the Member for Leominster (Bill Wiggin) made an impassioned speech in favour of low-carbon transport, which I thoroughly agree with. He mentioned the electric bikes that he has ridden. One of that company’s competitors turned up in my surgery a couple of Saturdays ago. All the companies involved are keen for that market to expand and be opened up so that people are able to do the right thing and start to use bikes and motorbikes that emit less than the ones that they have to use today. Finally, he talked about something close to his heart: cider. It is important to him and many hon. Members, and he was quite right to say that the Government’s approach to alcohol taxation was a blunderbuss approach.
Moving away from Members’ contributions to return to the Budget itself, there is no doubt that transport played a large part in it. Emissions from transport have risen by just under 6 million tonnes of carbon between 1997 and 2005, and 21 per cent. of the UK’s total CO2 emissions now come from transport. We all know that there are those who are wedded to their cars, and however hard we try, we just cannot get them to take any other form of transport, even for the shortest journey.
I understand from the paper that the Secretary of State for Children, Schools and Families recently chose to have his chauffeur drive him 450 yd to a Labour fundraising event and back again. Perhaps the key to success in good environmental tax policy might be for the Exchequer Secretary to have a chat with her friend the Secretary of State and see what policies could be introduced to get him out of his car. It is lucky for us that most other people in this country do not follow his example—who knows what CO2 emissions would be if they did?
There is no doubt that this Budget hits car owners in particular, and although the vehicle excise duty was meant to be a green tax to support those who had done the right thing, it does not do so. Perhaps more than 80 per cent. of car owners will pay more as a result of the changes to taxes on motorists. Many will be penalised for doing nothing more than owning a car in which to drive their family around. Those are the same families who face rising mortgages, energy bills and food bills. At the very time that they are experiencing more pressures on their disposable income—what is left at the end of the month—the Chancellor comes along, kicks them when they are down and says, “Thanks very much. I’ll have even more tax off you from your disposable income to pay for your car.” Although the
cost of living is going up, Labour is making it worse for those families. Families with a Ford Galaxy or Volvo V50, or those in an entirely different situation, such as black cab drivers, will face a £100-a-year increase in vehicle excise duty.
As was said, although there are tax cuts for cleaner cars, they total £15 million. That pales into insignificance when compared with the tax rise for polluting cars, which the Red Book shows comes to a massive £750 million. Again, I ask the Exchequer Secretary if she could provide more details of the behaviour that the tax change is meant to drive. Otherwise, many of us in this House and the public outside will have no alternative other than to conclude that it is a stealth tax, designed to get the Government out of their public finance hole. It is not just we who are concerned. Edmund King, president of the Automobile Association, has warned that the new bands could be a green smokescreen. Sheila Rainger of the Royal Automobile Club stated that many ordinary families will end up paying hundreds of pounds more.
Mr. Evans: Does my hon. Friend accept that cars and 4x4s in rural areas are not a luxury, but working farming vehicles? They are a necessity where rural transport is rather inadequate.
Justine Greening: My hon. Friend raises a good point. Not everyone is able to change to a lower-carbon car. Even if they pick a car that is best in class, it may still be found higher up the band because it is a particular sort of model.
I was about to move on to plastic bags. We saw yet another build-up—it was in the papers that we were going to have a plastic bag tax. What happens when we get to Budget day? We “may” have a plastic bag policy or tax. The irony is that it is very much, “Do as I say, not as I do” from the Government. It turns out that last year, the Government bought 1.2 million plastic bags to help raise the profile of various Whitehall bodies at a cost of about £90,000. I wonder whether any of them had the words, “Act on CO2” printed on them. Perhaps we will never know.
I cannot end my speech without mentioning zero-carbon buildings. That initiative was much vaunted, and the way in which it would kick-start the market was trumpeted. The Government’s aspiration—I assume I can call it that because they may no longer be able to describe it as a full pledge—is for all new domestic homes to be zero-carbon by 2016, which is only eight years away.
The Budget’s move to extend the stamp duty relief on zero-carbon homes to zero-carbon flats comes only six months after the original regulations, which specifically excluded flats and maisonettes, passed through Parliament. When the Government introduced those regulations, Ministers told me that the relief would kick-start the market. My hon. Friend the Member for East Surrey (Mr. Ainsworth) told us that, at the end of 2007, six homes had qualified. I can update the figure, which has risen. I am sure that he will be pleased to hear that, at the end of February, nine homes had qualified. [Interruption.] Labour Members say that that is a 30 per cent. increase, but the bad news is that the rate is reducing. Before the final quarter of last year, the Government were getting two a month, but now the figure is just under two—I admit that February was a short month.
I can only imagine the party in the Treasury when the tenth zero-carbon home qualifies for stamp duty relief. Doubtless, there will be a cake with 10 little candles and officials will run in and say, “Minister, Minister, Minister, at last we’re into double figures, so only 99.9999999”—hon. Members get the picture—“per cent. of the new build market to go.”
Page 105 of the Red Book deals with the reasons for the current position. It refers to the Government having a plan to finish defining a zero-carbon home by the end of the year. It is amazing that any homes managed to qualify, given that the definition has not been established. Perhaps we should congratulate the Government on getting as many as nine homes through when they have not managed to work out what constitutes a zero-carbon home. Nevertheless, we will see how they get on.
The Government are not content with new domestic build—the policy is being extended to Government buildings, public buildings and, by 2019, all non-domestic buildings. I am sure that the building industry will be keen to find out what zero-carbon means by the end of the year when the Government have finally managed to devise a definition.
Whereas the Government perceive green taxes as stealth taxes, the Conservative approach is more balanced. We perceive green taxes as replacement taxes. When there are tax rises in one sphere, we need to ensure that they are offset by tax reductions elsewhere. The Government do not understand that concept. For the Prime Minister and the Chancellor, green tax is not about changing behaviour; it is simply another way to raise money.
Friends of the Earth director, Tony Juniper, said:
“We urgently need real political leadership on this issue”,
but it is clear that we have none. The threat to the environment exists now. We need firm action, decisive policies and innovative thinking to make a difference now. In the Budget, the Chancellor gave us nothing but half measures, token gestures and a total lack of vision and direction. Is that what he means by stability? He should have called it inaction. The Secretary of State for Environment, Food and Rural Affairs told us that the Budget demonstrates how seriously the Government take the environment. Quite. They do not take it seriously at all.
9.13 pm
The Exchequer Secretary to the Treasury (Angela Eagle): The debate has been interesting. Last week’s Budget was delivered against the background of the most uncertain period in the global economy for some time. The problems in the world’s credit markets, which first manifested themselves in the American sub-prime mortgage market, have continued to reverberate around the world, not least over the weekend. That is the sombre background to our debates.
As we contemplate the events in the credit markets, however, it is crucial that we keep a sense of perspective. Clearly, we must tackle the current position, but we must also prepare our economy for the medium and long-term challenges that we will also face. Far from failing to fix the roof while the sun was shining, as the
right hon. Member for Witney (Mr. Cameron) has repeatedly claimed, we have attended to the necessary roof repairs. We have also renewed the rotten foundations that we found when we took over responsibility for the lease and have completely modernised the inside of the house. After the years of neglect and decline that went before, the Government have ensured that we can all inhabit a more secure and dependable family home. There is clear evidence of the progress that this Labour Government have been able to make in the 10 years during which we have been responsible for the lease of the building.
In 1997, Britain was the least stable economy in the G7. After 10 years of Labour stewardship, we are now the most stable economy. If we compare the record of our first 10 years of economic stewardship with the last 10 years of the Conservative Government, we begin to see why. Labour has achieved inflation rates that are on average half what they were when the Opposition were in government. Interest rates have been half what they were under the Tories, too, yet growth has been double what they managed to achieve. Employment rates are now at record highs, with the creation of 3 million extra jobs, and there are nearly 2 million extra homeowners. Household net income has increased by 25 per cent. since 1997 and net wealth has increased by 72 per cent.
Mr. Bellingham: What about the trade deficit, which I gather is the worst since records began? Am I right in saying that Britain has fallen in the World Economic Forum competitiveness rankings, from fourth in 1998 to 11th today?
Angela Eagle: We had the highest rate of growth in the G7 last year, at 3 per cent. The hon. Gentleman fails to talk about the figures that demonstrate the strength of our economy and he makes a partial case. The UK has been the fastest or the second fastest growing economy in the G7 for six of the past seven years and has achieved the fastest growth in income per head among all G7 countries in the past 10 years.
That record of success and stability means that, despite the global economic turbulence that we now face, the forecast evidence points to a slowdown, but not the end of growth in the UK economy. Our economy is strong, stable and resilient. In the testing conditions that we now face, that flexibility will stand us in good stead. Therefore, in last week’s Budget, my right hon. Friend the Chancellor had to consider what action he needed to take in the short term to assist with the challenges that we face due to global conditions. He also had to look through the short-term turbulence and uncertainty to prepare our country for the challenges that undoubtedly lie ahead. It is that longer-term challenge to which I want to turn.
Justine Greening: At Treasury questions the week before last, I asked whether the sustainable investment rule would be breached or whether the Government could guarantee that it would not be. Can the Exchequer Secretary give the House a guarantee that the sustainable investment rule will not be breached over the next three years?
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